As the tax collections grow in India, while India is not the richest country in the world but the tax collection here is one of the highest and the income tax rate should be reduced to 25 percent from around 40 percent at present, eminent economist Surjit Bhalla said. This reduction in tax rate is required to accelerate the pace of economic growth.
“We are a much more globalised economy in the world and the world is a lot more globalised. If you look at the overall tax rate structure in India, collection of taxes is one of the highest in the world and we are not the richest economy of the world,” Bhalla said. He said that tax collection by state, Centre and local bodies is around 19 percent of India’s GDP.
“We should move towards reducing it by 2 percentage points. As far as direct taxes are concerned, I think the overall tax rate should not be more than 25 percent. Right now it is close to 40 with surcharges etc. 25 percent, which is our corporate tax rate, that’s what our income tax rate should be,” Bhalla said.
Currently, the highest income tax rate in India stands at 39 percent. The Budget 2023-24 lowered India’s highest rate of income tax from 42.74 percent, by reducing the surcharge applicable on high net-worth individuals.
Bhalla said that taxes need to come down for all and not just benefit a select section of society. India’s gross direct tax collection during the last fiscal ended March 2023 grew over 20 percent to Rs 19.68 lakh crore. This includes gross corporate tax collection growth of 16.91 percent at over Rs 10.04 lakh crore. Gross personal I-T collection jumped 24.23 percent to over Rs 9.60 lakh crore.
Bhalla said direct tax is one of the areas where there is a lot of bureaucratic involvement and it should be a lot more streamlined to minimise tax evasion. This will eradicate corruption in the system and the citizens can be morally upgraded by simplification of the tax structure with reduced load to keep the head high.